Farm Programs:

An Analysis of Two Production Control Options

RCED-86-137: Published: Aug 11, 1986. Publicly Released: Aug 11, 1986.

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Because the problem of large crop surpluses and depressed commodity prices continues to be part of the U.S. farm agenda, GAO completed a comparative analysis of the Department of Agriculture's (USDA) Payment-in-Kind program (PIK) and an alternative program design for use in future farm policy and program decisions, using a private contractor's state-of-the-art policy simulation model.

GAO noted that the alternative program: (1) covered the same basic commodities as PIK; (2) would include only cash payments and would have an annual limit of $50,000 for each participating farmer; (3) would require legislative authority to enable USDA to pay farmers cash for taking land out of production; and (4) did not take into consideration the possible overall societal impact on consumers, U.S. export sales, and rural economies. GAO found that, for 1983 through 1986, the alternative program, as compared to PIK, would have resulted in: (1) $3.7 billion less in government farm program costs; (2) 47.4 million fewer acres planted in program crops; (3) a 23-percent reduction in commodity inventory levels; and (4) a $6.2-billion increase in farmers' net cash income. GAO believes that the results of the analysis underscored the need for USDA to analyze and review program alternatives before committing to major program changes like PIK.

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